How Centrelink decides if you're a couple or just flatmates

Noel Whittaker13 Sep 2017, 1:30 a.m.

Financial expert Noel Whittaker answers your questions.

My friend and I, both females, share a house. We are both retired and each own half the house. We are not a "couple" - we just get on well together and have shared accommodation for quite a few years now. It has enabled us to have a nice house in a nice area that neither of us could have afforded on our own.

My friend has substantial assets - well over the single pension assets test limit. I only have $230,000 in super and not much else in the way of assets. The house is paid off.

Is it worth my while to apply for the pension? I believe that Centrelink will view us as a couple and say neither of us is eligible. I am only asking whether it is worthwhile before putting both of us through the agony of the application, particularly as my friend will be obliged to give her information with nothing to gain from it.

I don't know where else to go to ask for help - even a few dollars a week would help my situation a lot.

A departmental spokesperson says that when single income support recipients share accommodation, the department will ask a series of questions about living arrangements to determine whether further assessment is required regarding the relationship.

By law, a person is considered to be a member of a couple relationship if they are married, or in a registered relationship (different-sex or same-sex), or in a de facto relationship (different-sex or same-sex); and are not living separately on a permanent or indefinite basis.

In determining if a person is a member of a couple, the department takes into account the financial aspects of the relationship, the nature of the household, the social aspects of the relationship, any sexual relationship between the parties involved, and the nature of the people's commitment to each other.

Based on the information you have supplied, it would seem your application should be successful, in which case you should qualify for a pension of around $840 a fortnight or $21,840 a year. That could make a huge difference to your life.

My wife is 63 years old, not working, but receiving an income via distributions from managed funds. Is she able to make tax deductible contributions up to $25,000 a year? Or do you have to be employed to make concessional contributions?

You only have to be under 65 to be able to make concessional contributions. Just bear in mind there is a 15 per cent entry tax that needs to be factored in when you are deciding whether it is tax efficient.

If somebody has an offset account against their primary residence loan, but has kept their excess money in the loan account and not in offset account, can they still claim the interest on the loan when the property is rented out?

Now assume it an investment property loan? If the money is kept in the loan account and not the offset account, and then redrawn, will the interest be tax deductible?

If you choose to deposit surplus funds in your loan account, and not hold them in the offset account, they will be deemed to have been used for permanent reduction of the debt. Therefore, if the purpose of the loan was to buy your residence, interest can be claimed only on the balance outstanding when the property is available to rent. This is why it is important to accumulate funds in the offset account and not pay them off the loan.

If you withdraw funds from an investment loan account by increasing the debt, the tax deductibility of the interest will depend on the purpose of the recently borrowed funds. For example, non-deductible for a private purpose such as a holiday, deductible if used to buy income-producing assets such as shares.

I have a query regarding the means-tested care fee for residential care. On the My Aged Care website it states that the amount a person needs to pay will depend on their financial situation as well as the cost of their care. How does the government determine the cost of a person's care?

The cost of care is the amount of funding the facility would receive from the government. The facility cannot get more from the resident than they would from the government. For example, if the calculated means tested care fee was $200 a day but the amount of funding the facility were going to get from the government was $100 a day then the means-tested care fee would be capped at $100. The cost of care is calculated based on the person's care needs.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: asknoel@fairfaxmedia.com.au.